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Morning Coffee – The top bankers who get laughed at behind their backs. UBS makes peace with an old enemy

It’s fair to say that ESG professionals are not always particularly popular with their colleagues.  There are quite a few reasons, legitimate and otherwise, why this might be the case.  For one thing, there’s a perception that ESG types are sometimes a bit judgey of less demonstratively ethical bankers.  And for another, there’s good old fashioned jealousy at the fact that ESG has been a high-demand and well paying niche. 

But Tariq Fancy (former CIO of sustainable investing at BlackRock) thinks it goes deeper than that.  In his view, bankers are often correct to suspect that their peers in ESG are bluffers.  When asked whether people in the sector were “underqualified” and “unable to articulate the risks and opportunities sufficiently” at a conference, he replied that this was “100% what people were saying behind the scenes”.

Some of them are saying it in front of the scenes too, of course – regulators have even coined the phrase “competence washing” for the kind of ESG operations that DWS’ Desiree Fixler blew the whistle on.  But according to Tariq Fancy, things might be getting better.

He notes that there’s no “magical data set that you sprinkle on top that makes you a better investor”, and that “sexy areas of the market” like diversity on company boards were always more to do with marketing than investment.  However, there are a number of areas adjacent to ESG considerations which look much more amenable to old-fashioned analytical skills. 

For example, the construction industry wastes 30% of its lumber, while fashion companies often end up burning excess clothing because they can’t figure out demand.  In general, someone who is wasting natural resources is very likely to be wasting money too, and getting them to stop it – or investing in a competitor who isn’t – ought to be well within the circle of competence of a good fund manager or banker.

This might be a vision for ESG professionals as experts in alternative data – using the non-financial measures associated with environmental, social and governance issues to identify areas likely to affect financial performance in the long term and track down sources of alpha.  Which, of course, was the whole original idea for ESG strategies in the first place. 

But it seems like they got lost in a blind alley of scorecards, ratings and easily gamed metrics, while also generating a lot of marketing copy which promised to change the world and reinvent capitalism, but actually just got people’s backs up.  Which potentially raises a question as to whether the ESG industry is overdue for a shake-up, one in which some of its more media-friendly figures might have to step aside.

Elsewhere, one of the least glamorous jobs in Swiss banking must be that of the team at UBS whose task it is to go through all the legacy legal issues that they acquired with Credit Suisse, and find a way of putting them in the past at the lowest possible cost and embarrassment.  Among these cases was the litigation against a finance blog, which has now been crossed off the to-do list.

The lawsuit against “Inside Paradeplatz” was originally at least partly motivated by Credit Suisse wanting to look after its employees, who were the subjects of regular and vitriolic attacks in the reader comments section.  This appears to have been recognised with a statement of regret and a promise to review the comments in future.  But CS had originally asked for the removal of parts of 52 articles, and the website ended up only removing three. 

With the benefit of hindsight, this looks like a great lesson in how it’s possible to lose one’s sense of perspective under the kind of stress that the banking industry can generate.  It’s quite likely that the adverse publicity generated by the lawsuit reached an audience several multiples bigger than the original readership, and added to the general sense of chaos.  When everything seems out of control, bankers, like anyone else, tend to lash out rather than concentrate on what might really make a difference.

Meanwhile …

The Asian version of Citadel’s intern offsite appears to have been just as fancy as all the others, with crab salad and security guards at the Fullerton Ocean Park Hotel in Hong Kong.  While carrying out programming projects and simulated trading challenges, the interns were making $19,200 a month and getting training on how to present themselves and how to not write tedious emails.  (Bloomberg)

Google will soon be launching an AI tool that can sit in on a virtual meeting and take notes for you.  Not only that, your virtual assistant can “attend” and even automatically generate some text about things you want to discuss.  Surely it can’t be long until every meeting is attended only by robots and the rest of us can get on with some work. (The Verge)

An idea that sounds crazy but it just might work … if David Solomon wants to be more popular with Goldman Sachs bankers, then perhaps he could consider paying them more money?  But that might make him less popular with the shareholders.  (Bloomberg)

A former Morgan Stanley MD is suing the bank, claiming that he was terminated and replaced by someone less experienced “because of diversity and inclusion initiatives”, despite having run an inclusive leadership program himself previously.  The company isn’t commenting. (Washington Post)

Goldman Sachs has reached a settlement with the CFTC over some failures to record telephone calls dating from the earliest days of the pandemic.  The fine ($5.5m) is pretty small in the wider context, but it’s unlikely to make senior management any keener on allowing more working from home. (Bloomberg)

The sweet spot between “too young to know anything” and “beginnings of cognitive decline” is apparently the ages of 53 and 54.  That’s what researchers into personal finance decisions have found, although you’d probably get surprisingly little disagreement in most banks if you stated it as a generally applicable result.  (WSJ)

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AUTHORDaniel Davies Insider Comment

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